July 12, 2023
TRANSITORY IS AS TRANSITORY DOES:
Measure It Differently, and Inflation Is Behind Us (James Mackintosh, July 12, 2023, WSJ)
Because our times are boring without fake crises.U.S. core inflation--which excludes volatile food and energy--measured using the standard consumer-price index was 2.3 percentage points higher than the European-style inflation, known as the harmonized index of consumer prices. It is the biggest gap there has ever been.The main reason is that Europe's measure, known as HICP, doesn't include the imaginary cost of what a homeowner would pay to rent their house, which makes up about a third of the U.S. core CPI. Known as "owners' equivalent rent" or imputed rent, the measure has long had its critics.Exclude something that no one actually pays, and which is calculated from guesses by homeowners of the rental value of their house, and core inflation's looking basically fine, at a fraction under 3%. I've concentrated on core inflation, because food and oil prices swing so much that they make it hard to tell if the economy is generating inflation pressures the central bank needs to tackle.So why is everyone still so concerned about inflation?
Posted by Orrin Judd at July 12, 2023 12:00 AM